Ong v. Fire Insurance Exchange

In Ong v. Fire Ins. Exch., 235 Cal.App.4th 901 (April 3, 2015), the California Second District Court of Appeal reversed the trial court’s entry of judgment in favor of Fire Insurance Exchange (“FIE”) in connection with the application of a “vandalism or malicious mischief” exclusion to a property loss caused by a fire started by a transient while staying in property owned by the plaintiff, Hung Van Ong (“Ong”).

As of February, 2010, the property was vacant. Gas and electric utilities were turned off on that date. On December 20, 2011, Ong tendered a claim to FIE for property damage sustained as a result of a fire earlier on December 20, 2011. FIE investigated the claim and determined that the fire was started as a result of an uncontrolled warming fire started by an unauthorized inhabitant. Signs of possible habitation were present in the relatively isolated location which permitted the transient to start a fire.

The adjuster’s report noted the presence of firewood in the adjacent room and a mattress next to a large hole in the floor of the premises. Apparently, the hole burned in the floor by the door was the result of the occupant attempting to throw burning wood outside, and the warming fire went out of control and caused damage to the building. The FIE claim log noted that there was a bed in the kitchen and that the fire was caused by an “unintentional incendiary.” The report concluded that there was a “likely transient in the house and warming fire got out of hand. Firewood found inside house.”
Subsequently, FIE sent a letter to Mr. Ong disclaiming coverage for his claim based on the “vandalism or malicious mischief” exclusion in the FIE policy. The exclusion stated as follows:

We do not cover direct or indirect loss from . . . . 4. Vandalism or malicious mischief, breakage of glass and safety glazing materials if the dwelling has been vacant for more than 30 consecutive days just before the loss. A dwelling under construction is not considered vacant.

The FIE policy did not define the term “vandalism.”

Thereafter, Mr. Ong filed a complaint for breach of contract and bad faith against FIE for denying his property loss claim. In response, FIE filed a motion for summary adjudication on the grounds that the vacancy exclusion barred coverage for the loss under the policy’s “Coverage A – Dwelling” section as Ong was seeking “coverage for an intentionally set fire that destroyed a vacant dwelling.” Thereafter, the trial court entered summary judgment in favor of FIE. The trial court relied on the definition of “malice in law” established in criminal cases addressing arson that had been cited by FIE in its motion for summary judgment. The trial court also held that the dwelling was vacant as contemplated in the fire insurance policy.

In reversing the trial court’s decision, the Court of Appeal noted that the trial court relied on the definition of “vandalism” found in the dictionary, wherein, vandalism refers to “willful or malicious destruction or defacement of public or private property.” The term ‘malicious’ in turn is defined in the dictionary as ‘having or showing a desire to cause harm to someone.’”

The Court of Appeal noted that by using these dictionary definitions, vandalism in the ordinary and popular sense means the willful destruction of property or the destruction of property with a “desire to cause harm.” However, the Court of Appeal noted that the trial court did not look to the dictionary definition of “malicious” to determine its ordinary and popular meaning. Rather, the trial court relied on the meaning of “malice” in the “legal sense” as cited by FIE in two criminal cases. The Court of Appeal held that the trial court’s failure to consider the definition of “malicious” in its “ordinary and popular sense” was in error and reversed the trial court’s entry of summary judgment in favor of FIE. In reaching its decision, the Court of Appeal reasoned as follows:

But the Supreme Court noted in In re V.V. that “‘[“If the meaning a layperson would ascribe to the language of a contract of insurance is clear and unambiguous, a court will apply that meaning.” (italics added)].) The Supreme Court has stated that malice as “‘universally understood by the popular mind’” involves “ill-will” and not simply a wrongful, intentional act done without justification, excuse or mitigating circumstances. (In re V.V., supra, 51 Cal.4th at pp. 1027–1028.) Thus, the reasonable interpretation of “vandalism” as used in the policy exclusion means malicious destruction or defacement where there is malice in fact or actual ill will or intent to injure. (In re V.V., supra, 51 Cal.4th at p. 1028.)

After interpreting “malice” in its ordinary and popular sense, the Court of Appeal noted that the transient apparently kicked the firewood in an attempt to knock it out the door and stop the spread of the fire. Hence, “the fire was ‘unintentionally incendiary.’” Hence, the vandalism and malicious mischief exclusion did not apply to bar coverage of the claim.